Fibonacci convergence, clusters – trading, drawing – guide

You may use the Fibonacci convergence to find very strong resistance or support. This is very helpful in planning the size of your position, the place of stop loss and the whole action plan.

The convergence can be very useful, but for new traders, it is hard to use. It is not that complicated, which I will try to show in this chapter.
Before trading with the Fibonacci convergence you should feel comfortable with using the Fibonacci retracement and extension levels. You should be able to easily choose the price swings to draw them. If you are not that experienced, do not worry! Just read this chapter or skip it and return to study it later when you will have more experience in using the retracement and extension.

At the beginning, I wrote that the price moves in a zigzag formation. I showed you how you can choose the swing to draw the Fibonacci retracement or extension. Trends are built upon many different swings. The convergence is a situation when you draw the Fibonacci retracement lines for more than one swing and when some of the levels are close to each other.

In the example below the price moves up making many swings. There are a couple good points to choose to draw the Fibonacci retracement. Which one would you choose?

4.1. Clean uptrend and many swings to choose from.

The one below is very easy to spot, so of course we can use this low and high and draw the retracement levels:

4.2. First possible swing where we can draw retracement lines.

We can also use high and low from a bigger move, where the price moved back to the 38.2% retracement line. This is the same chart as the one above:

4.3. Another possible swing to choose.

When we put these two retracement levels together, we will see that some of them are
very close to each other:

4.4. Putting retracement lines for different swing together.

You can notice that the first convergence level was 38.2 (red) and 23.6 (blue), but the price did not stop there. The second level of convergence was at 61.8 (red) and 38.2 (blue). The price found strong support and from that point, the uptrend continued.

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